VIABILITY OF USING WELLHEAD POWER PLANTS TO ACCELERATE GEOTHERMAL DEVELOPMENT IN KENYA

Transcription

1 VIABILITY OF USING WELLHEAD POWER PLANTS TO ACCELERATE GEOTHERMAL DEVELOPMENT IN KENYA Shammah Kiptanui & Ezekiel Kipyego 6 th African Rift Geothermal Conference Addis Ababa, Ethiopia 2 nd 4 th November 2016

2 Outline Introduction Wellhead Generation Menengai Project Overview Methodology Results Conclusions 2

3 Introduction. Kenya has prioritised geothermal for its power generation. GoK aspires to generate 5000 MW of electricity from geothermal sources by 2030 In October 2015, Kenya s geothermal power plants dispatched 400 GWh (approx. 51%) As at May 2016, geothermal installed capacity was 632MW (27.5% of total installed electricity generation of 2,341 MW). 3

4 Introduction Kenya s initiatives to accelerate geothermal development Government support: Policy e.g. FiT. and PPP frame work financing early resource exploration Building in-country capacity (personnel & equipment) Institutional Framework: Unbundled and Specialized energy sub sector Despite the institutional, financial, legal and regulatory frame work, the pace of geothermal power development is still slow 4

5 Early generation techniques Photo: Olkaria Wellpad There is need to adopt technological measures Kenya has adopted early generation techniques by use of well-head generators. 5

6 Early generation techniques... Kenya s Wellheads Experience 12 wellhead plants installed at the Olkaria geothermal field with a capacity of 65MWe (approx. 10% of total geothermal capacity) A further 120MW of installed wellheads capacities are planned and scheduled for commissioning by There is a growing interest from generators for further investment in more units to leverage on time and revenue 6

7 Early generation techniques Wellheads Merits Easy deployment Impact Boosts electricity supply: more access Early revenue generation (time value of money) Eases financing dependence Displace diesel (drilling) Portability Standardized design and construction Long term testing of fields (green) Reduced project costs Easily be moved to new and other geothermal areas Highly reliable Increases private sector investor confidence 7

8 Early generation techniques... Wellheads Demerits Problems with distribution operation Difficulty in make-up well allocation Impact Grid connection requirements Extra cost for drilling Low efficiency relative to large conventional plants inability to enjoy the benefits of economies of scale Wellhead has been successfully deployed at Olkaria geothermal field (which is a mature field or BROWNFIELD). There is need to plan and deploy wellhead generators in other geothermal fields or GREENFIELDS e.g. Menengai 8

9 Menengai Project Overview. Resource risks have been reduced - accelerated drilling program and proving of commercial amount of steam. Resource identified high temperature, high enthalpy, two-phase, 1 st exploration well 2011 (MW-01) Steam quality range of approx , more suitable for single flash plant Number of wells by October wells completed. Within the same period flow tests performed on several wells. The central power plants construction process expected to commenced end of

10 Menengai Project Overview. If the steam was used as early as it was proven, the project could have been earning revenue progressively 10

11 Hypothetical Wellhead Timelines Time interval (TI) determined from the first episode of flow testing to COD of central plant. TI = 3.5 years. Construction of central power plant assumed to commence in December 2016 and take 2 yrs. Total time interval (TTI) until the commercial operation date (COD) of the central power plant TTI = 5.5 years. A hypothetical single flash wellhead power plant of size 5MW was considered 11

12 Methodology This study focused on duration between field development and power plant construction phases of the project (COD) The time interval (TTI) was used to determine the viability of installing wellhead power plant before the commissioning of central plant, and over the WHU economic life Financial and economics of 5MW WHU over TTI was carried out. Profitability assessment models were applied (NPV, IRR and FCF) 12

13 5MW WHU assumptions Technical Assumptions Value Unit Wellhead power plant capacity 5 MW Plant Economic life 20 Years Number of operation hours 8768 h/y Plant steam Consumption 8 t/hr/mw Electricity Costs (Feed in tariff) 8.8 US Cents kwh Capacity factor 95 % Wellhead procurement Start date June 2012 Date Wellhead Commercial Operation Date (COD) Conventional Plant construction start date July 2013 Dec 2016 Date Date Conventional Plant Commercial Operation Date (COD) Dec 2018 Date 13

14 5MW WHU assumptions Costing Assumptions Value Unit Capital Costs Power Plant Capital Cost 2.5 MUSD/MW Indirect Power Plant Costs: Evacuation Facilities 0.5 MUSD General Contingency 2.5% 0.4 MUSD Tax Contingency 5% 0.8 MUSD Operation & Maintenance costs Fixed O&M 0.5 MUSD/yr Financing Repayment period 10 years Months per year 12 months Interest rate of loan 8 % Local taxes 30 % Equity/Debt ratio 70:30 % Total Time Interval 5.5 Years 14

15 Results Total Capitals costs for 5MW WHU - $15 million. Projected net revenue: $7 million - First 5.5 years $32 million in its economic life (20 years). NPV and IRR NPV Net Cash Flow turns +ve in 5 th Year WELLHEAD REVENUE ANALYSIS TTI (5.5 Yrs) ECONOMIC LIFE (20 Yrs) UNIT Net Cash flow MUSD NPV Total Cash Flow (Project) -5 4 IRR Total Cash Flow (Project) % NPV Net Cash Flow (Equity) 0 3 IRR Net Cash Flow (Equity) % Discounting Rate (MARR) Total target rate Discounting Rate (MARR) Equity target rate % % 15

16 Results Decision Project IRR vs. Project MARR Equity IRR vs. Equity MARR Project NPV Equity NPV Measure TTI (5.5 Yrs) Decision Rule ECONOMIC LIFE (20 YRS) Measure Decision Rule -3%<12% Not Viable 17%>12% Viable 17%<18% Not Viable 35%>18% Viable -5 Not Viable +4 Viable Viable 16

17 Conclusion Technical, financial and economics assessment of a 5MW well head generation unit is viable project if deployment is a long term strategy Installation of wellhead generation is the best solution for realizing early revenue needs. 17

18 Thank You